All contract are agreement; but all agreement are not contract discuss?Introduction:

The law relating to contracts is to be found in the Indian Contract Act, 1872. It comes into forcefrom 1

st

September, 1872. It extends to the whole of India except the state of Jammu & Kashmir.

Meaning:

The term

contract

is derived from the Latin word

contractum

which means draw together. It is anagreement entered into between two or more person/ parties subject to certain terms & condition for lawfulconsideration.

WHAT

IS

A

CON

TRA

C

T?

Section 2(h) of the Indian Contract Act, 1872 defines a

contract

as an agreement enforceable by law.Section 2(e) defines

agreement

as ³every promise and every set of promises forming consideration for each other.´Section 2(b) defines

promise

in these words: ³When the person to whom the proposal is made signifies his assentthereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.´

According to Section 10, ³All agreements are contracts if they are made by free consent of parties,competent to contract, for a lawful consideration and with a lawful object and are not hereby expresslydeclared to be void´.

As per the definition given in the Indian contract Act 1872 a contract must essentially consist of the followingelements:1)

An Agreement; 2)

Enforceability by Law

An Agreement

: The term Agreement has been defined under Section 2(e) of the Indian contract Act as Everypromise and every set of promises, forming the consideration for each other, is an

agreement

.

Enforceability by Law

: an Agreement, to become a contract must give raise to a legal obligation. The term obligationis defined as a legal tie, which imposes upon a definite person or persons the necessity of doing or abstaining fromdoing a defiant act or acts. It may be social or legal matters. An agreement, which gives raise, to a social contract isnot a contract. In order to give raise to a contract the agreement must be a legal agreement.Therefore

It is the most common method of making a contract through an agreement. One party makes an offer and the otherparty accepts the same.

Agreement = Offer + AcceptanceExamples:

y

A promises to deliver his house to B and in return B promises to pay a sum of Rs 50000/- to A. both of them agree the offer made by the party. It is said to be an agreement between A and B. thus a validcontract is concluded between them.

y

An agreement to sell a scooter is a contact.

y

An agreement of lease is a contract.

y

An agreement of hire-purchase is a contract etc.

Section 2(h) defines a

contract

as an agreement enforceable by law. That means an agreement an agreementshould possess all legal requirements to become a valid contract. So that it can be enforceable by law anagreement which cannot be enforceable by law is no useful. Such agreement becomes µvoid¶.An agreementenforceable by law is contract, and by such a contract only relations between the parties arise. All enforceableagreements contain the legal obligations and not merely moral, social or religious obligations.An agreement which is enforceable by law alone is a contract. The phrase

Enforceability by Law means

anagreement which is intended to be enforced by law should possess all the essential requisites of a valid contractsection 10 of the Indian contract act explains what agreements are contracts that what are valid contracts.

Thus, the essential elements of a valid contract can be summed up as follows

y

F

ree and genuine consent. .

y

P

arties must be competent to contract.

y

There must be Lawful consideration and Lawful object.

y

The Agreement musts not expressly be declared o void or illegal.

y

Where the provisions of any other law in force require the agreements must be in writing.If the above requisites are not found in any agreement, it cannot be treated as a valid contract. Contracts originatefrom agreements which are intended by parties to give rise to legal obligations. However, there are certainagreements which cannot be called as contracts.

Ex

amples of agreements which are not contracts:

a)

An agreement to come to dine is a mere agreement; it cannot be enforceable by law. Because the agreementdepends upon the volition. b)

A contract which runs into such minute or numerous details, or which is so dependent on the personalqualification or volition of the parties, or otherwise from its nature is such that court cannot enforce specific performance of its material terms.c)

An agreement to do illegal act is not enforceable by law.

Ex

amples

: an agreement to kill a person is not acontract an agreement to injure a person is not a contract. Because these agreements are against public policyand against the law.d)

A an author makes an agreement with B a publisher to complete a literary work. B cannot enforce specific performance of this agreement. Because it involves personal qualification of A.e)

A contract to marry B. B cannot enforce specific performance of this contract.f)

(

R

udar vs. Narayan

) A a landlord and B a tenant made a contract that A would enter into a contract of leaseafter 2 years. The

P

rivy Council held that ³A contract to grant a lease cannot be a contract enforceable in lawsince law does not recognize a contract to enter into a contract´.g)

An agreement of which a material part of the subject matter supposed by both parties to exist, has before ithas been made ceased to exist.

Illustration

: A contracts to pay an annuity to B for the lives of C and D. itturns out that at the date of contract. C though supposed A by and B to alive was dead. The contract cannot bespecifically performed.h)

All void contracts are not enforceable by law. An agreement with a minor is void. It cannot be enforced.Section 2(g) states that an agreement not enforceable by law is said to be void.i)

An agreement the terms of which the court cannot find reasonable certainty is not a contract and is notenforceable by law.

Conclusion

: in the above examples of agreements, we have seen that they are not enforceable by law, and they donot contain requisites of a valid contract. Therefore, it is said ³all agreements are not contract, but all contracts areagreements.´ It means every contract enforceable by law consists an agreement. But every agreement may not become a valid contract and may not be enforceable by law, if it does not possess the required elements as per section 10.

2

.

D

istinguish between offer and invitation to treat

?

Or

H

ow would you distinguish a proposal from an invitation to receive proposal refer to statutoryprovisions and decided cases

?

Offer

: the offer as defined in section 2(a) has two purposes.i.

In the first place an expression of the offerors willingness to do or to abstain from doing something.ii.

Secondly, it is made with a view to obtaining the assent of the offeree to the proposed act orabstinence.

The proposal must be made with a view to obtaining the assent of the other party. Since the contract requiresconsensus ad idem, unless the offer is aware of the offer, there can be no acceptance and consequently nocontact. An offer cannot take effect so as to create binding contract, unless and until it has been brought to theknowledge of the person to whom it is made. The offeror must have expressed his willingness to contract in termsof his offer with such finality that the only thing to be awaited is the assent of the other party.

Invitation to offer:

where a party without expressing his final willingness, proposes certain terms on which he iswilling to negotiate, he does not make an offer, he only invites the other party to make an offer on those terms. Itis called

invitation to offer

.Illustrations for

invitation to offer:

1.

An advertisement in the newspaper house to let or house for sale etc.2.

An advertisement of the bookshop owner that he has a stock of book to sell.3.

An advertisement of the cloth shop owner that he has a stock of cloth to sell.4.

A tender5.

An auctioneers announcement that specified goods will be sold by auction of a certain day etc.The above illustrations are not the

offers

. They are only

invitation to offer.

Because there is no final willingnessfrom the side of the party. Now itself the party cannot be termed as

offeror.

Invitation to offer is different from alegal offer. Invitation to offer does not possess the legal; requirement of an offer, which are embodied in section2(a). It is just like an enquiry.

Case law:

H

arvey vs. Facie (1893)

The plaintiffs telegraphed to the defendant: will you sell us bumper hall pen estate? Telegraph lowest cash price.The defendants replied by telegram: lowest price for bumper hall pen estate is £ 900. The plaintiff sent their lasttelegram: we agree to buy bumper hall pen for £ 900 asked by you.Later, the defendants refused to sell the estate. The plaintiff sued the defendants for the breach of the contract.The court held that the above correspondence did not conclude as successful contract. In their telegram theplaintiffs asked the defendants answered only the second question. They did no answer the first questions: (1)about their willingness to sell their estate, (2) the lowest rate. It was an enquiry. It was an invitation to offer. Thedefendants answered only the second question. They did not answer the first question about willingness. The validoffer must contain willingness. Hence mere statement of the lowest price itself was not an offer. Therefore, nocontract arose between the plaintiffs and defendants, and the defendants were not bound to it.

A shopkeeper¶s catalogue of prices is not an offer. It is only an invitation to the intending customers to offer to buyat the indicated prices. If the prices are themselves treated as offer then the shopkeeper will be put to irreparabledifficulties. Because the litigant customer may ask huge stock at the rate, and the quantity may not be available inthe city or country.

L

ord

H

erschell

say: the transmission of a price list does not amount to an offer to supply anunlimited quantity of the wine described at the price named, so that as soon as an order is given there is a bindingcontract to supply that quantity. If it were so the merchant might find himself involved in any number of contractualobligations to supply wine of a particular description which he would be quit unable to carry out, his stock of wineof that description being necessarily limited. This principle is also applicable in the self service system in the shop.It was decided in the above case.